U.S. Investors Embrace Alts, Lag Behind on ESG Investing

September 24, 2018

American investors are increasingly more open to alternative investments in their portfolios, such as real estate investment trusts and hedge funds, according to a new survey from Cerulli Associates cited by ThinkAdvisor. But it appears their focus on making money is precluding them from embracing sustainable investing.

U.S. financial advisors allocated 7.2% of the overall assets they managed in 2017 to alternative investments including REITs, private investments, private equity, hedge funds and real estate, compared to 5.7% the year prior, Cerulli found, according to ThinkAdvisor.

Close to 40% of advisors report using alternatives excluding liquid alternatives, and a little over 37% use liquid alternative mutual funds, according to the survey cited by the publication. As of the end of 2017, investors worldwide held close to $9 trillion in alternative assets, ThinkAdvisor writes citing data from Giuditta.

The lure of alternatives in the U.S. could be explained by the investors’ desire to maximize their returns.

“Americans are focused on making money,” Cary Krosinsky, who teaches sustainable investing at Yale and Brown universities, tells Bloomberg in relation to a recent survey from UBS Group AG.

When it comes to putting money into environmental, social and governance-related investments, U.S. investors come in last among those with $1 million or more in liquid assets across 10 countries, the news service writes.

While 60% of respondents in China and 53% in Brazil have ESG holdings, only 12% of U.S. respondents do, UBS found, according to Bloomberg. However, the survey also found that wealthy Americans who do invest in ESG holdings put close to half of their assets into such investments, the news service writes.